March 12, 2023

What does it mean when the federal reserve sets interest rates?

The Federal Reserve is the central banking system of the United States and has the responsibility of setting interest rates. Interest rates are the rate of borrowing money from a bank, and can affect the economy on a macro level. When the Federal Reserve sets interest rates, it is attempting to influence how much people borrow and spend, which in turn affects inflation, employment and economic growth. Lower interest rates encourage borrowing and spending, while higher interest rates discourage it. The Federal Reserve can adjust interest rates to help stabilize the economy, or to control inflation.